Thursday, January 10, 2008

Legal defences for not paying taxes

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That is a hard question to ask because we all come from different jurisdictions. Its safe to say that if the law saids you are required to pay taxes, you face the threat of consequences if you dont. Having said that lawyers are very good at finding ways at avoiding taxes.

Have you ever wondered why legal loopholes constantly seem to appear in the tax system? Why the tax acts for each country continue to get increasingly complex, requiring pages and pages of legislation to defend? There is a simple explanation.....


The more complex answer is that government fears retribution for applying taxation. They dont want to state as a matter of principle what they are doing - forcing people to pay money. The reason they dont want to do that - as a matter of principle - is that there are no facts of reality to support the notion that you should pay tax. But more importantly, there is no principle to defend them if you dont, and they are worried that you could hold them accountable for forcing you to pay tax. Or perhaps its just an ego thing? They just dont know how to answer the question, so in their minds they just dont deal with it, so if you asked the question, they would pass off an answer which evades the question.
That is why you get the argument....everyone is legally required to pay taxes... which is actually not true for certain taxes in the United States.
But you never hear government officials, whether politicians or bureaucrats, arguing that "It is a moral obligation for people to pay taxes". At least I have never heard it, and I think it would be a political slip that no one will make....if they are smart. Why?
The relationship between morality and the law is not clearly demarcated. Morality has always had its legitimacy in religion rather than science and logic. People have always accepted the religious tenets that its moral to give, thus practical to take. But how do you reconcile the morality of giving, but a practical market economy based on taking. Of course people can rationalise that we give and take, and rationalise the fact that the 'virtue' lies in giving, and the 'practicality' lies in receiving. Whilst that might neatly compartmentalise the issues, and create a comfortable dichotomy for some, the reality is that, if we dont receive in the capitalist market economy, we dont give. So as society embraces the practicalities of science and logic, and the humanities slowly get their act together, moral arguments are going to start to sound more compelling than the religious tenets which seem less relevant than ever. See my 'Ridiculing Religion' Blog at There will also be some pertinent arguments at

Its interesting when you see patterns of thinking across different sectors of the government, and you develop insights into how people's thinking works and why. Take taxation. It shares some common attributes with accounting. Have you ever wondered why accounting is so bogged down in rules....there are heaps of them. Its all for the sake of taxation. I studied accounting...and I didnt much enjoy the number-crunching, but I loved the idea that accounting is based on principles. There is a logic to it. I was studying philosophy (logic, ethics) at the time...which I am sure most accounting undergraduates dont do, so I think thats why I embraced it. I think most undergraduates just change their majors rather than deal with it. :)
So what is wrong with accounting, or what taxation has done to accounting. Well its replaced principles with arbitrary rules. Since arbitrary rules have no basis in reality, you get tax loopholes that need to be filled, which require new rules, resulting in new loopholes. Asked why the accounting code is getting so complex, some accounting professionals or politicians argue that its because 'Life is complicated', that 'Life is not simple', But it could be....if they would embrace principles. But they dont do that because principles need to have some basis in reality, and they are adamant that principles will not serve their interests. So you will get some accountants (like me) posing the question, why doesn't accounting just apply the principles and hold them in the context of reality, like common law. The reason is - they would be accountable. So I now see a link between the way accounting is treated, and the way the tax act is treated. You get arbitrary definition of terms, requiring a complicated interpretation of the law. Because the law is always 10 days ride from the last village in the parlance of Jessy James, which translates to 'legislation is 18months behind the tax office', it means the tax office is one of the most dangerous institutions on earth, wrecking havoc on people's lives.
Its so contradictory when you get a telephone audit by the tax office and they have some a friendly, upbeat voice, whilst I am of course begrudgingly down tempo, yeh I was a non-resident that year, thats why I didnt pay Medicare Levy....according to our records you were a resident...Well I dont have the information, that was 3 years ago. Is it OK if we bill you for that...Well OK, I'll just pay it, I dont want to deal with it. On that occasion fear overtook me, and resignation to the fact that I really just dont want to deal with them. Its easier just to pay the money. Kind of like being pulled up for doing 120kmph in a 60kmph zone. But officer, the law is not logical. This stretch of road is freeway quality, I am ascending so I can brake easy, so there is less threat to human life than the manouvre you made to catch up to me. And you had me watching my rear-view mirror all the time when I should have been focused on the cars around me. Officer, you are a safety hazard! I swear I am not going to give in to these people again. The adage that 'speed kills' is just a plackard. Life is not so simple? Well its not if you dont act in accordance with principles. I should have argued the case. But who is ready at the time for an ethical debate? I guess there was the opportunity later, but who wants to go to court for $160. To fight for the principle? Would it change anything...nope. Only if I can change people's minds. Only if I can organise opposition to taxation.
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